How will Coal India’s new levies benefit the stock?

Analysts who have coverage on state-run Coal India Ltd. see a potential upside of up to 45% on the stock, after India’s largest miner announced a uniform levy of ₹300 per tonne across all mines of its subsidiary, Northern Coalfields Ltd.The ‘Singrauli Punarasthapan charge’ will come into effect from May 1, 2025. The company said the expected additional revenue due to levies will be around ₹3,877.5 crore. NCL reported dispatches of 114 MT from April 2024 to January 2025, which is 19% of Coal India’s overall dispatch of 630 MT during this period.

Brokerage firm Nuvama expects a ₹34 per share increase in the fair value of Coal India, assuming a 5x increase in the Enterprise Value-to-EBITDA multiple. Currently, Nuvama has a price target of ₹419 per share, which is a 15% upside potential from Thursday’s close. A ₹34 increase will change the upside potential to nearly 25%.

Nuvama expects Coal India’s levies to increase its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for financial year 2026 and 2027 by 9% and 10% respectively.It said the cash inflow is likely to be widely used to fund the upcoming land acquisition and rehabilitation programme at one of the mining areas in Singrauli over the next few years.
The estimated capex of ₹17,000 crore in each of financial year 2026 and 2027 mostly incorporates upcoming capex on rehabilitation project of the Singrauli area.Morgan Stanley has an “overweight” rating on the stock with a price target of ₹525 per share, which is an upside of nearly 45% from Coal India’s previous closing price. It sees the ‘Singrauli Punarasthapan Charge’ and its subsequent additional revenue estimate as positive development as the levy is 2.5% of the stock’s financial year 2026 estimated revenue and it implies an 8% upside risk for next year’s earnings estimates.

A key factor to watch for Coal India, according to Morgan Stanley, will be whether the company is able to take price hikes over and above the recent one as it currently sees only a 2% growth in Coal India’s FSA realisations.

Brokerage firm JPMorgan has a “netural” rating on Coal India with a price target of ₹420 per share, which implies a potential upside of 15.7% from the previous closing price. Based on its calculations, the brokerage anticipates flow-through of the EBITDA estimate for the next two financial years to be 8% to 9% or more.

Of the 24 analysts that have coverage on Coal India, 18 have a ‘buy’ rating, four have a ‘hold’ rating and two have a ‘sell’ rating.

Coal India was the top Nifty 50 gainer on Friday, February 28. The stock was up 2.36% at ₹372.45 apiece at 11.45 am. The stock has fallen 28.53% in the last six months.

Also Read: GREED & fear: Chris Wood introduces investment in InterGlobe Aviation, removes this PSU stock